EFG-Hermes feels pain of deal drought and reduces staff costs by over 50%
EFG-Hermes has not had a very good 2009 so far, with the slump in investment banking deals driving first half profits down by 57% year on year. Its move to cut staff and pay has seen its employee costs fall by a similar percentage, and bonuses look like being drastically scaled back.
EFG-Hermes is the largest publicly traded investment bank in the Middle East, and its focus on equity capital markets means it's been particularly badly hit as IPOs have all but dried up in the region. The bank says it has a number of deals in the pipeline, but that they'll remain on hold "unless major shift in sentiment takes place".
The second quarter actually marks an improvement for the bank, and investment banking revenues increased by 14.9% from Q1 to EGP271m ($48.4m) and by 17% across the group as a whole.
"The trend across the region is looking better for our industry at the half-year mark than it did at the beginning of 2009," said CEO Hassan Heikal.
Perhaps not surprisingly, the bank has been focusing on cost reduction, and the redundancies announced in March, alongside 20% pay cuts for 200 executive staff, have contributed to a 51.8% year on year drop in employee expenses, which currently stand at EGP175m ($31.5m).
However, it still employs 851 staff, which is just two less than this time last year.
EFG Hermes didn't reveal how many employees were set for the axe in March, but just 19 have left since the end of the first quarter, suggesting either the cuts haven't been too deep or that it's hired in other areas.
It did not return calls for comment to confirm this. Recently, however, it has taken on Philip Southwell as chief executive officer for GCC countries excluding Saudi, and Hossam Yousef Radwan to head its KSA operations.
It also said in January that it was continuing to hire Arab speaking bankers, mainly from foreign firms.
The bank has accrued just EGP11m for bonuses in the second quarter ($1.9m), and this was responsible for a 14.8% rise in staff costs since March.
While it admits bonuses look diminutive compared to this time last year, the bank says Q2 2008 was one of the best periods of last year, meaning the pot swelled during that period.
